Pensions Costs

The recently announced proposed increase in Teachers’ Pensions Scheme (TPS) employer contributions from 1 September 2019, has shocked the academy sector. Treasury indications predict a rise to 23.6% - an increase of over 40%. Most schools were expecting a 2% to 3%.

This will have a major impact on budgets. Although the DFE have indicated that they will fund part of the difference in the first year, academy trusts will have to look at alternative sources of revenue to fund the increase. It is also likely that there will be more mergers and collaborative working because many trust will have already cut budgets to an absolute minimum. Clearly, trusts will need to re-forecast their budgets with this in mind and monitor what additional levels of funding will be available to cover the increase. 

With regard to the LGPS rates, the view, at present, is that rates will be steady!!!. However, rates vary widely across the UK. As part of its due diligence, a trust that is actively expanding will need to consider, the impact of taking on a school with a significant employer pension contribution. We have seen rates varying up to a 30% employer contribution. Schools currently have their forecast rates to 2019/20 and the next change will be made in 2020/21 (based on valuations at 31 March 2019).

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